Magazine article American Banker

Feeding Database, Visa Hopes It Can Soothe Merchants

Magazine article American Banker

Feeding Database, Visa Hopes It Can Soothe Merchants

Article excerpt

In an effort to ease retailers' rage over rising interchange, Visa U.S.A. has begun requiring issuers to provide information about certain cardholders so that it can help merchants design direct mail campaigns.

Analysts said the strategy could put pressure on American Express Co., which until now could tout its closed-loop network, and the market intelligence it provides, as a competitive advantage.

The Visa Incentive Network will officially launch in June. The requirement to provide cardholder names and addresses, and data on their spending habits, became effective April 1 for banks that issue Visa Signature and Traditional Reward cards.

Jim McCarthy, a senior vice president at Visa, said the campaigns will be "extremely profitable" for merchants.

"The key is the targeting" using the database Visa has compiled, he said.

The San Francisco association pilot-tested the program in December with a large office supplier and plans to mail a category-wide promotion for a group of West Coast grocery stores in June, followed by two merchant-specific campaigns.

It has also signed on a national hotel chain, and the office supplier has requested another mailing, Mr. McCarthy said.

Howard Mason, an analyst at Alliance Capital Management LP's Sanford C. Bernstein & Co., said the program could give Visa an advantage over American Express.

"Amex has always had an edge in that they see what transactions cardholders are doing where," he said. "The Visa Incentive Network creates the same infrastructure that Amex's closed-loop network has."

Visa and MasterCard International both raised interchange rates recently. But Visa has "established that the price hikes are coming with added value," Mr. Mason said.

Kenneth Posner, an analyst at Morgan Stanley, said he had heard that card companies were trying to emulate a closed-loop network, but that "this is the first time that anybody credible has said they are actually making things happen. …

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